NEW YORK, Nov. 13, 2018 /PRNewswire/ -- Wix.com Ltd. (Nasdaq: WIX), a leading cloud-based web development platform, today reported financial results for the third quarter ended September 30, 2018. In addition, the Company provided its initial outlook for the fourth quarter of 2018 and updated its 2018 full year guidance.
"Our strong third quarter results demonstrate that we continue to develop a product experience on Wix that is best in class," said Avishai Abrahami, Co-founder and CEO of Wix. "Wix is in the midst of another substantial product release cycle to deliver even more value to our users – we recently introduced Wix Payments, as well as enhancements to Wix Code and the all new Wix Video Maker, and we have begun releasing the new DeviantArt platform to its community. We also plan to announce a new product in December that will elevate how small businesses are managed and grow online. With these new products, and the performance we have seen to date, we look forward to continuing our momentum throughout 2019."
Lior Shemesh, CFO of Wix, added "Our business model is a unique combination of strong top line growth and improving profitability, which was again demonstrated with our third quarter results. These results are also a reflection of the strong returns we continue to realize on our investments in R&D and marketing as well as the consistency and predictability of our business."
Q3 2018 Financial Summary
Additional Q3 2018 Results and Highlights
- Revenue in the third quarter of 2018 was $155.6 million, a 40% increase over the same period last year. Under ASC 605, third quarter revenue would have been $153.6 million, a 38% increase over last year
- Collections in the third quarter of 2018 were $162.8 million, a 36% increase over the prior year period
- Gross margin on a GAAP basis in the third quarter of 2018 was 79%, compared to 83% for the third quarter of 2017; non-GAAP gross margin in the third quarter of 2018, calculated as non-GAAP gross profit as a percent of revenue, was 80%, compared to 84% for the third quarter of 2017
- Under ASC 605, third quarter 2018 GAAP gross margin as a percent of revenue would have also been 79%
- Results in the third quarter include the impact of the change from net (agent) to gross (principal) accounting related to the amended terms of our partnership agreement with Google announced earlier this year. As previously stated, this impact is an approximately $30 million benefit to FY 2018 revenue and collections and approximately $7-8 million each quarter in 2018. This impact also has resulted in a year-over-year decrease in our GAAP and non-GAAP gross margins
- GAAP net loss in the third quarter of 2018 was $(5.9) million, or $(0.12) per share, compared to a net loss of $(14.5) million, or $(0.32) per share, for the third quarter of 2017. Under ASC 605, third quarter 2018 GAAP net loss would have been $(7.0) million
- Non-GAAP net income in the third quarter of 2018 was $18.8 million, or $0.39 per share, compared to non-GAAP net income of $0.4 million, or $0.01 per share for the third quarter of 2017. Under ASC 605, third quarter 2018 non-GAAP net income would have been $17.7 million
- Net cash provided by operating activities in the third quarter of 2018 was $27.6 million, while capital expenditures totaled $3.9 million, leading to free cash flow of $23.7 million, compared to $18.9 million of free cash flow in the third quarter of 2017, a 25% year-over-year increase
- Added 177,000 net premium subscriptions in the third quarter of 2018 to reach 3.8 million as of September 30, 2018, a 26% increase over the total number of subscriptions at the end of the third quarter of 2017
- Added 5.5 million registered users in the third quarter of 2018. Registered users as of September 30, 2018 were 137 million, representing a 20% increase compared to the end of the third quarter of 2017
Recent Business Highlights
- Announcing Wix Payments: Wix recently launched Wix Payments, a comprehensive payments platform to help owners manage and grow their business. Wix Payments allows users to set up and accept payments without the need to integrate third party payment providers. Wix Payments also enables small businesses to manage their entire financial flow, from sales to payouts, in a single place, solving a significant challenge with doing business online. Any type of business, including e-commerce retailers, service providers, restaurants, hotels, musicians, photographers and many more, will be able to take advantage of the efficiency, reliability and safety provided by Wix Payments. Wix Payments is available today in Brazil and will be available in the US and Europe in early 2019. Additional markets in Latin America and Asia Pacific will also gain access to Wix Payments throughout 2019.
- Momentum in Wix Code Adoption Continues: New functionalities have enabled users to create more complex and robust websites with Wix Code than ever before on Wix, and we are seeing evidence that our strategy of penetrating the professional market is succeeding ahead of our expectations. Users of Wix Code who have purchased subscriptions are purchasing multiple subscriptions at a rate of more than four times non-Wix Code users, an indication that usage by professionals is increasing. Further, traffic of visitors to sites built using Wix Code is five times more than traffic to non-Wix Code sites, an indication that these sites are more robust. We believe this data indicates that Wix Code is opening us up to a new, more professional customer base.
- Launched the Wix Video Maker: To enable Wix users to market and grow their business through the use of video content, we launched the Wix Video Maker. Wix users can now quickly create custom videos to showcase their business, products or brand on their Wix website or other channels. This product solves the challenge small businesses face in creating engaging video content for advertisements, allowing them to compete with larger businesses online.
- Began Testing the New DeviantArt: In October, we began testing the newly redesigned and modernized DeviantArt platform with its most active community members. We are gathering and implementing feedback from this group and are on schedule to launch the new platform to all users in the coming months, consistent with the timeline we established when we acquired DeviantArt.
- Opened Customer Support Center in Dublin: Wix opened a Customer Support Center in Dublin, Ireland to further enhance our global support infrastructure. The location will cater to users in multiple languages, including English, French, Spanish, Portuguese, German and Italian.
- Announces Board Authorization of Share Repurchase Plan: The Wix Board of Directors has authorized a share repurchase plan under which up to $100 million is available to purchase Wix's outstanding ordinary shares. Wix intends to file a motion seeking court approval in Israel to extend the previously approved right to repurchase shares granted in July 2018 that expires December 31, 2018. The extension requested would be for six months, commencing on the later of (i) December 31, 2018 or (ii) the receipt of the required court approval. Wix intends to continue filing extension requests on an ongoing basis as required. Subject to approval by the Israeli courts, under the board authorized plan, shares may be repurchased from time to time in open market transactions at prevailing market prices, in privately negotiated transactions or by other means in accordance with federal securities laws and regulations, and the repurchase plan may be suspended or discontinued at any time. For all or a portion of the authorized repurchase amount, Wix may enter into a plan that is compliant with Rule 10b5-1 of the United States Securities Exchange Act of 1934, as amended, that is designed to facilitate these purchases. The actual timing, number and value of shares repurchased depend on a number of factors, including the market price of Wix's common stock, general market and economic conditions and other corporate considerations.
Wix is introducing its outlook for the fourth quarter of 2018 as follows:
Wix is updating its outlook for the full year 2018, which reflects the continued decline in foreign exchange rates since guidance was last provided in July. Had FX rates stayed constant, we would have raised the collections and free cash flow outlook by approximately $2 million, or $660-$662 million for collections and $103-$105 million for free cash flow.
Conference Call and Webcast Information
Wix will host a conference call at 5:00 p.m. ET on Tuesday, November 13, 2018 to answer questions about the financial and operational performance of the business during the third quarter of 2018. The conference call will include a brief statement by management and will focus on answering questions about our results during the quarter. To enhance the Q&A portion of this call, the Company has posted a shareholder update and supporting slides to its Investor Relations website at https://investors.wix.com/ . These materials provide shareholders and analysts with additional detail for analyzing results in advance of the quarterly conference call.
To participate on the live call, analysts and investors should dial 866-966-5335 (US/Canada), +44-203-003-2666 (International) or 1-809-216-213 (Israel) at least ten minutes prior to the start time of the call and reference Conference ID WIX. A telephonic replay of the call will be available through November 20, 2018 at 11:59 p.m. ET by dialing +44-(0)-208-196-1998 and providing Conference ID 84853377.
Wix will also offer a live and archived webcast of the conference call, accessible from the "Investor Relations" section of the Company's website at https://investors.wix.com/ .
About Wix.com Ltd.
Wix is leading the way with a cloud-based development platform for over 139 million registered users worldwide. Wix was founded on the belief that the Internet should be accessible to everyone to develop, create and contribute. Through free and premium subscriptions, Wix empowers millions of businesses, organizations, artists, and individuals to take their businesses, brands and workflow online. The Wix Editor, Wix ADI, a highly curated App Market, and Wix Code enable users to build and manage a fully integrated and dynamic digital presence. Wix's headquarters are in Tel Aviv with offices in Be'er Sheva, Berlin, Dnipro, Dublin, Kiev, Los Angeles, Miami, New York, San Francisco, São Paulo, and Vilnius.
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Non-GAAP Financial Measures
To supplement its consolidated financial statements, which are prepared and presented in accordance with U.S. GAAP, Wix uses the following non-GAAP financial measures: collections, non-GAAP gross margin, non-GAAP operating income (loss), free cash flow, non-GAAP net income (loss) and non-GAAP net income (loss) per share (collectively the "Non-GAAP financial measures"). Collections represents the total cash collected by us from our customers in a given period and is calculated by adding the change in deferred revenues for a particular period to revenues for the same period. Non-GAAP gross margin represents gross profit calculated in accordance with GAAP as adjusted for the impact of share-based compensation expense, acquisition-related expenses and amortization, divided by revenue. Non-GAAP operating income (loss) represents operating income (loss) calculated in accordance with GAAP as adjusted for the impact of share-based compensation expense, amortization, and acquisition-related expenses. Non-GAAP net income (loss) represents net loss calculated in accordance with GAAP as adjusted for the impact of share-based compensation expense, amortization, amortization of debt discount and debt issuance costs, and acquisition-related expenses. Non-GAAP net income (loss) per share represents non-GAAP net income (loss) divided by the weighted average number of shares used in computing GAAP loss per share. Free cash flow represents net cash provided by (used in) operating activities less capital expenditures.
The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The Company uses these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. The Company believes that these measures provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making.
For more information on the non-GAAP financial measures, please see the tables included with this press release. The accompanying tables have more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures. The Company has not reconciled its free cash flow guidance to net cash provided by operating activities because net cash provided by operating activities is not accessible on a forward-looking basis. Items that impact net cash provided by operating activities are out of the Company's control and/or cannot be reasonably predicted. Accordingly, a reconciliation to net cash provided by operating activities is not available without unreasonable effort.
This press release contains forward-looking statements, within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Such forward-looking statements may include projections regarding our future performance, including, but not limited to revenue, collections and free cash flow, the availability, merchantability or functionality of certain new products or features and their anticipated product demand and customer satisfaction, and may be identified by words like "anticipate," "assume," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "outlook," "future," "will," "seek" and similar terms or phrases. The forward-looking statements contained in this press release, including the full year guidance, are based on management's current expectations, which are subject to uncertainty, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Important factors that could cause our actual results to differ materially from those indicated in the forward-looking statements include, among others, our ability to grow our user base and premium subscriptions; our ability to maintain and enhance our brand and reputation; our prediction of the future collections generated by our user cohorts; our ability to manage the growth of our infrastructure effectively; our ability to effectively execute our initiatives to scale and improve our user support function; customer acceptance of new products and other challenges inherent in new product development, changes to technologies used in our solutions or in global, national, regional or local economic, business, competitive, market, regulatory and other factors discussed under the heading "Risk Factors" in the Company's 2017 annual report on Form 20-F filed with the Securities and Exchange Commission on March 29, 2018. Any forward-looking statement made by us in this press release speaks only as of the date hereof. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise.
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